The Power Index: carbon cutters, Oliver Yates at #4

Oliver Yates is the ex-Macquarie banker who turned his back on a lucrative career to head up the government's controversial (and possibly short-lived) green bank. Why did this "maverick" do it -- and what will he do with $10 billion of your money?

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Banking chief Oliver Yates seems horrified to be asked if he is a “greenie”.

What’s a greenie, he asks? An environmentalist, The Power Index replies; someone who wants to protect the environment. There’s a pause. “I consider myself to be a father with three kids,” he answers carefully, explaining he feels a responsibility to the next generation.

It’s a fair question. Why would someone who’s spent 20 years in the millionaires’ factory of Macquarie Bank leave all that to head up the government’s new, controversial green bank — which might be shut down before it gets going?

Yates is CEO of the Clean Energy Finance Corporation, which has $10 billion of taxpayers’ money to invest in renewable energy and energy efficiency. The money starts to flow with an initial $2 billion from July; the Coalition has already promised to close this “giant slush fund“.

There’s not so much as a dreadlock or a hemp garment to be seen on this suited banker, but one lesson soon becomes clear: if you strip away the emotional language of the climate wars, there are people who would like better environmental outcomes in unexpected places.

Yates started at Macquarie in 1988 and worked in Australia, Europe and the US, for both Macquarie Bank and Macquarie Capital. He shifted to the company’s green banking section relatively recently and was global head of utilities and climate change (including investments in wind, solar and carbon credits) from 2008-10. He worked on REDD, the UN’s forest carbon scheme.

Yates’ salary doesn’t appear in Macquarie’s annual reports; the firms’ top executives earned $1.4-5.2 million, including bonuses, in 2010. An expert on banking remuneration pointed out Yates was at Macquarie for the pre-GFC boom years, and estimated he may have been paid close to or over $1 million in some years, depending on the performance of his portfolio (Macquarie was known for paying highly variable salaries depending on the latter, while base pay could be relatively — and we’re talking about bankers here — low).

Yates left Macquarie in 2010, was involved in smaller firms — Driftwood Capital and Linc Energy — and unsuccessfully sought NSW Liberal preselection for the Senate in 2009. He started at the CEFC in November, lives in Melbourne and commutes to CEFC headquarters in Sydney.

The CEFC was a surprise announcement. Modelled on the UK’s green investment bank, it sits within Treasury and lends money to co-finance green projects. Reserve Bank stalwart Jillian Broadbent is the board chair (she’s seen as the safe pair of hands at the top, with Yates as the day-to-day driver), and there’s an ex-Macquarie power clique, with Michael Carapiet and Anna Skarbek on the board.

The CEFC can invest in manufacturing and transmission, but is aimed more at proven technologies than start-ups, and doesn’t give loan guarantees or grants. Its line of credit doesn’t appear in the budget; the money is lent out and the government expects a rate of return equivalent to the bond rate (about 3.5%). So Yates doesn’t just spend your money, he’s supposed to get it back.

Yates has a cool, brusque manner when interviewed over a coffee in Melbourne. He doesn’t bother with spin or try to persuade; he gives straight answers and behaves like someone used to being listened to. He seems used to letting his balance sheets do the talking. Crikey shouts Yates a coffee, which is probably what you want from the person in charge of $10 billion of your money.

“Most industry insiders reckon Yates has the Macquarie touch (read: a banker’s ego). One senior figure said you either like him or you don’t.”

Climate industry analyst Rob Fowler welcomed the arrival of this mainstream banker: “I think it’s important people from the real world get more and more involved in this area.”

Other insiders were less complimentary. Most Crikey spoke to reckon Yates has the Macquarie touch (read: a banker’s ego). One senior figure said you either like him or you don’t; Yates “came into this [climate field] late” and is “quite a maverick in a way”. Yates has plenty of money and could retire (he’s now 47), giving him the freedom to work where he wanted — including a place at risk of closure. “Come hell or high water he’s going to do the best he can,” the insider said.

Another source confirms Yates is concerned the CEFC will close. Yates turned heads when he publicly rejected the opposition’s calls for the CEFC to not spend anything because the government should apparently be in caretaker mode. “That Act means I will be investing when I have available money and I will invest during the election, during the caretaker period, after the election …,” Yates told journalists.

He has since pulled his head in — bruised by the foray into a tense political debate? Still, if the Coalition wins, Yates may wind up in a different senior public role, or seek Liberal preselection down the track. His top-tier banking background would appeal to the Coalition.

As for the man himself, Yates got interested in the environment after observing the excessive consumerism (and power of vested interests) in the US. He thought the science was in on climate change and the next major growth area was the low-carbon economy. His approach is “creating a change through commerce”. Capital for renewable energy dried up post-GFC, so he left Macquarie.

Yates has interesting ideas on growth — that it might not always be good — and financed a 2011 documentary called Decadence: Decline of the Western World (“it’s very important for people to ask where we are at any point in time” is all he’ll say). He thinks environmental resources have limits, and GDP is not be the only valuable growth index. But he won’t do more than needle at the edge of capitalism, and says “you have to use capitalist levers to influence capitalist systems”.

The way he sees it, uncertainty — partly over policy — cramps investment in capital-hungry renewable energy, and banks have limited experience (“no one likes to be the first person in a traditional bank to take a new risk”). The CEFC, which doesn’t have the balance sheet charges of a bank, steps in, offering long-term capital for renewables.

Critics question why the government is cherry-picking green projects to finance, especially given the existence of the Renewable Energy Target. They point to money going to waste overseas, while economists might prefer a purer policy than this jumble of carbon price, RET and green bank. The CEFC is seen by some as a rushed, Greens-appeasing carbon price sweetener.

So that’s the puzzle of the millionaire banker who turned his back on a lucrative job to take up a controversial and possibly short-term job as a senior public servant. “In essence I’m just a banker, that’s what I do. But if you can do good while you’re doing your job, then that’s just a bonus,” is Yates’ final word.

Thanks Cathy A for this series.
One would have thought that doing ‘some good’ whilst being any leader in what ever sphere should be an imperative or basic modus operandi rather than an optional extra that offers a ‘bonus’.

I don’t care how many billions of winner-picking taxpayer dollars he controls, there’s no way anyone with such a carbon-profligate modus operandi deserves to be on any list of carbon cutters, let alone no. 4.

Climate industry analyst Rob Fowler welcomed the arrival of this mainstream banker: “I think it’s important people from the real world get more and more involved in this area.”

– and why would that person be any more competent than someone from the public service. It’s nonsense to suggest that someone with ‘real world’ experience would be any better than one of the many, many highly skilled people in the senior ranks of the public service. Indeed, what is an ex-Macquarie banker likely to be best at ? The whole culture of merchant banking is to maximise one’s own personal position. I would guess that Mr Yates and his ilk spent rather less time thinking out the return the shareholders of Mac Bank were getting as a result of his efforts, than he though about his own remuneration. In fact, probably the only thing worse than an ex high flying banker to be in charge would be an ex politician.

Considering its the bankers who are to blame for GFC, manipulating the markets, interest rate derivatives, Libor scandal, Collusion between wall street and Capitol hill in US! Bank of England admits loss of income caused by banks is as bad as World War II, fraudulent and criminal activities with south American drug money etc.
These are the people still in charge of the system and were suppose to trust them? However, I take my hat of to him for realising it was the perfect time to get out.

Depends whether the ‘formal policy’ actually applies to the CEO’s lifestyle – he wouldn’t be the first CEO to be practically exempt from such things. And even if it does, I’m not sure how ideal it is to have a Charlie-like boss who only ever appears to his employees as a disembodied voice or head on a screen.

I still find the arrangement incongruous in the extreme, and bemusing that more hasn’t been made of it.